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Judgment
Per: Satya Ranjan Prasad, Member (Technical)
This application has been filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (for brevity “IBC, 2016”), read with Rule 11 of the National Company Law Tribunal Rules, 2016 by the Applicant in IA(IB) No. 273/CB/2022 seeking reliefs mainly to the following effect: - A. “Pass an order declaring that the impugned distribution mechanism is illegal and arbitrary; B. Pass an order directing the respondent to put issue before the Committee of Creditors for reconsideration; C. Pass an order directing the said distribution mechanism must be finalised considering all the points raised by the applicant in the present application;”
The applicant herein states that various applications under Section 7 as well as under Section 9 of the IBC, 2016 were filed against the Corporate Debtor (CD), out of which the present CP(IB) No. 111/CTB/2020 was admitted by this Tribunal vide order dated 20.09.2021 and CIRP was initiated against the CD and Mr. Shiv Nanda Sharma was appointed as the IRP.
Pursuant of the order of this Tribunal initiating CIRP against the CD, the IRP proceeded in making the public announcement dated 23.09.2021 inviting various stakeholders to submit their claims on or before 04/10/2021 respectively. It is submitted that the applicant vide email dated 04.10.2021 had submitted its claim under FORM C dated 01.10.2021 as Financial Creditor to the IRP for an amount of Rs. 1,42,00,12, 966.40. In the 1st meeting of CoC it was decided that Mr. Vijaykumar V. Iyer i.e., the Respondent in the present application shall act as the RP in the present CIRP initiated against the CD.
Thereafter, various communication between the applicant and respondent No. 1 took place. After scrutiny of the said Claim Form an email dated 25.03.2022 was sent by the Respondent No. 1 to the Applicant accepting a sum of Rs. 1,12,14,77,927/- as financial debt towards the CD and hence, the applicant being a Financial Creditor became a member of the CoC having 4.98% of voting rights. The applicant immediately on 24.09.2022, wrote an exhaustive email to the CoC and the RP explaining how the applicant will be affected if such a less amount is being granted to him towards full and final settlement of its dues of Rs. 112 Crore approximately.
It is submitted that without considering the request made by the applicant to the Respondent No. 2 the above distribution mechanism was approved by the Respondent No. 2 with an approval of 95.02% votes. The voting result was shared by the Respondent No. 1 via email on 28.02.2022. It is submitted that the RAs, namely, M/s. Indarni Patnaik and Shivom Minerals Limited in consortium with Euro Pratik Ispat (India) Pvt. Ltd. have clearly in their Resolution Plan proposed that the distribution of the plan amount shall be made equally amongst all the Financial Creditors, regardless of whether they are secured or unsecured. However, the said request of the Applicant was rejected by the Respondent No. 1.
It is submitted that the applicant is having a share of 4.98% of the voting rights in the CoC which binds him to contribute equal amount towards Corpus Funds and also allows the applicant to vote equally towards any decision being made in the present CIRP. Therefore, the applicant being a Financial Creditor is also entitled to have equal share of amount from the payments being received by the CoC from the approved Resolution Plan, especially, when the Resolution Plans provide for equal distribution. Respondent No. 2 itself on 24.04.2022 proposed to pay 4.474% from the upfront cash received from the approved Resolution Plan but eventually in 23.09.2022 the said proposed distribution mechanism was brought down to mere 1.992% without considering the requests made by the Applicant. The CoC being given the powers under the Code cannot resort to abuse of powers as no power is absolute.
Applicant further states that he is a private entity which has contributed tremendously to keep the CD a going concern by advancing financial debts to the admitted tune of Rs. 112 crore (approx.). It is similarly placed with other institutional Financial Creditors who have advanced loans to the CD. As an outcome of the CIRP, the haircut being received by the other members of the CoC relates not to their own money but to the public money. That for the proper perspective, M/s. Indrani Patnaik and Shivom Minerals Limited in consortium with Euro Pratik Ispat (India) Pvt. Ltd., the applicant is entitled to receive an amount of Rs. 22.17 Crore and Rs. 26.65 Crore respectively. However, due to the illegal distribution mechanism proposed by the CoC, he is entitled to receive a paltry sum of Rs. 5.23 Crore and Rs. 3.03 Crore respectively.
In light of the above, applicant states that the entire process of finalisation of the distribution mechanism is completely arbitrary, unjust and illegal act being done by the Respondent No. 2 which is not sustainable in the eyes of law. Therefore, in view of the above, the applicant has approached this Tribunal, seeking reliefs as above.
The Respondent Nos. 1 and 2 have filed their replies dated 09.11.2022 and 14.12.2022 respectively stated inter alia that the voting on the Resolution Plan has concluded on 12.10.2022 and the Resolution Plan of the Successful Resolution Applicant (SRA) was approved by the CoC with a voting share of 88.98% votes. The pertinent fact to be noted here is that the Applicant also voted in favour of the Resolution Plan thereby agreeing to the distribution Mechanism approved by the CoC. Pursuant thereto, an application being I.A. No. 276/CB/2022 seeking for approval of the Resolution Plan was filed by the Respondent No.1 which is pending before this Adjudicating Authority.
The Applicant itself has voted in favour of the Resolution Plan and is now estopped from challenging the Resolution Plan. The Resolution Plan provided for pay-out to the creditors including the Financial Creditors in accordance with the decision of the CoC on the distribution mechanism for payment to Creditors. The Applicant having participated in the CoC meeting and approving the Resolution Plan, it was in the commercial wisdom of the CoC and no-objection can be raised by the Applicant at this stage.
The Objections raised by the Applicant with respect to the distribution mechanism was deliberated upon multiple times by the CoC and the CoC in their commercial wisdom has derived and agreed upon a distribution mechanism for payment to the Creditors under the Resolution Plan.
Respondent side submits that during 16th meeting dated 22.08.2022, the CoC deliberated upon the distribution mechanism for payment to Creditors as proposed in the Resolution Plan, wherein one of the CoC members suggested that it would circulate a detailed working of the proposed distribution amount in respect of all the financial creditors based on the amounts proposed by the Prospective Resolution Applicants (PRAs) highlighting scenarios under the different proposals suggested by CoC members during the meeting. It was also agreed that in case no consensus is arrived at between the CoC Members, the compliant plan shall be put to vote as it is and the distribution mechanism proposed therein shall be deemed final.
That during the 18th CoC meeting held on 23.09.2022, distribution mechanism for distribution of the Resolution amount was discussed by the CoC in detail and the agenda for approval of the distribution mechanism was put to vote before the CoC from 23.09.2022 to 28.09.2022. The Resolution for distribution mechanism of proceeds of Resolution Plan was approved by the CoC with 95.02% of the voting rights.
The Applicant vide email dated 24.09.2022 objected the amount agreed to be paid to the them i.e., 1.992% of the Resolution amount in terms of the approved distribution mechanism. Further, vide separate E-mail dated 30.09.2022, the Applicant requested the Respondent No.1 for certain amendments in the minutes of 18th CoC meeting to the extent of methodology of distribution. That at the 19th meeting of the CoC dated 30.09.2022, the Applicant's request for amendment in minutes was discussed and it was observed that minutes were prepared in-line with and therefore the same was not recorded as part of the minutes of the meeting. Pertinently, no further revisions upon the distribution mechanism were agreed by the CoC.
That during the 20th meeting of the CoC held on 07.10.2022, the Applicant again requested the CoC members to consider their request and increase their share of proceeds of the Resolution amount. However, no change was made by the CoC in the distribution mechanism so approved by the CoC.
We have heard the arguments of both the sides and have perused the documents filed by the both petitioner and respondents. Here two issues have emerged. As stated above, the Applicant also voted in favour of the Resolution Plan thereby agreeing to the distribution Mechanism, which has been approved by COC with 95.02 % votes. Further, the Resolution Plan of the SRA has been approved by the CoC with 88.98% of voting rights, which has already been filed before this Adjudicating Authority for approval. The Applicant has also voted in favour of the Resolution Plan, now estopped from raising claim against the Plan. This Resolution Plan has provided for pay-out to the creditors in accordance with the decision of the CoC on the distribution mechanism for payment to creditors. In view of the forgoing, we are not inclined to allow this application, more particularly on the count that after voting in favour of the plan, which has been approved by CoC in its commercial wisdom, the Applicant cannot raise objections to the plan at the present stage of the CIRP. CoC by a majority vote of 95.02 % voting shares agreed on the distribution mechanism and a mere dissent to the same cannot be a ground for declaring the agreed upon distribution mechanism as arbitrary and illegal.
In result, IA(IB) No. 273/CB/2022 shall stand DISMISSED. No order to cost.
Registry is hereby directed to communicate this Order to the petitioner and also to the respondent. Let the certified copy of the Order be issued upon compliance with the requisite formalities.